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Credit Unions Seen As Less At Risk Than Banks

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By KRISTA KLAUS

News Channel 8

Published: September 30, 2008

TAMPA - It started about a month ago, said Patricia Reeves, branch manager with Bay Gulf Credit Union. Customers started calling with questions about the security of their deposits.

"A lot of them are concerned about their money," Reeves said. "I'm just trying to reassure them that they're insured and their money is safe."

With credit freezing, banks failing and stocks plummeting, people are nervous about any place they put their money.

But credit unions are as safe as they ever were, one financial analyst says, because they stayed away from one of the risky instruments behind the current panic: mortgage-backed securities.

"The credit unions are much more plain vanilla," said Karen Dorway, president of BauerFinancial, which reports and analyzes the performance of U.S. banks and credit unions.

"They take in deposits of members and make loans to members but generally are not involved in this kind of risky and complex investment."

U.S. credit unions hold $676 billion in deposits, and U.S. banks hold $7 trillion. There are 32 credit unions in the Bay Area and 188 in Florida, according to BauerFinancial.

GTE Federal Credit Union in Tampa has $180 million in cash reserves to help weather difficult financial times, said Rich Helber, executive vice president.

"We are well capitalized, and our capital ratios have been going up in the past few months, not going down," Helber said.

GTE Financial this month received a three-star, or "adequate," rating from BauerFinancial in its quarterly review of financial institutions.

Bay Gulf received a "problematic" rating from BauerFinancial -- two stars out of five, making it the lowest-rated credit union in Florida.

Bill DeMare, president and CEO of Bay Gulf, blames the growing number of members who are unemployed or underemployed.

"Members come in, and they're unable to make payments, and that's where we have many of our issues," DeMare said.

Bay Gulf received the low rating because of problems with past-due loans, largely unrelated to the immediate financial crisis, said BauerFinancial's Dorway.

"They have problems with delinquent loans, but it doesn't appear to be a part of the Wall Street problem," Dorway said.

Credit union members should feel confident their money is safe because deposits are fully insured by the National Credit Union Administration, DeMare noted. The NCUA insures deposits up to $100,000 per credit union member, much like the Federal Deposit Insurance Corp. with banks.

Bay Gulf member Charlie Slack says he not worried about his money.

"If it isn't safe here, it's not going to be safe anywhere," Slack said.

Still, with so much uncertainty, many customers say they're being extra careful with their cash.

"I have to watch how I spend my money," said Delores Olowookere of Tampa. "You know, you go a little spend crazy and have to pull back."

For information, visit the NCUA Web site at webapps.ncua.gov/inc/.

Reporter Krista Klaus can be reached at (813) 225-2736 or kklaus@wfla.com.

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